Sales commissions and the Procuring Cause doctrine

On Behalf of | Dec 8, 2021 | Employment Law |

Commissions are often the lifeblood of a sales representative. How those commissions are handled – when they come due and how they’re paid – can vary from one industry to the next and from one company to another. In a perfect world, every contract between a sales rep and a company would carefully detail commissions so that there is no confusion. But what happens when that detail is absent?

The Procuring Cause doctrine

Generally speaking, when a sales rep is terminated, all commissions must be paid within 45 days of when they became due. The agreement a sales rep signs with a company may define exactly when commissions become due, or it may not. If it doesn’t, the question arises of what commissions the sales rep is entitled to. Was it their responsibility to bring in new customers? Or was their job to bring in sales, regardless of whether those sales were from new or old customers?

This is where the procuring cause doctrine comes in, to help answer these questions when they arise. The doctrine is not found in Michigan’s Sales Representative Commission Act; instead, it is a doctrine created by the judiciary to help prevent a company from unfairly taking advantage of a sales rep. In its simplest form, the doctrine states that the sales rep is entitled to a commission if they can show their efforts were the procuring cause.

There is no single definition of whether a sales rep was the procuring cause of a sale. Rather, it is based upon the particular facts and circumstances of an individual case. The greater the sales rep’s role was in concluding a sale, the more likely they were the procuring cause. It’s a nuanced area of employment law and open to interpretation. And even if a sales rep was, in fact, the procuring cause and entitled to a specific commission, the amount of future sales they warrant can be affected by many factors.